Labour says it would consider restricting foreign ownership of residential properties to help ease pressure on the housing market.

Labour’s finance spokesman David Parker has previously said the party would restrict foreign ownership of rural land, but as recently as May he said restricting foreign ownership of residential property was not Labour policy.

However, Mr Parker appeared to soften his position on TV3’s The Nation this morning, saying Labour “would consider” foreign ownership of residential land.

At the rate Labour is going, I expect a merger by Christmas and the new co-leaders of the combined party to be Holly Walker and Jacinda Ardern.

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The Savings Working Group must be hard-left also?
Government policies blamed for house prices

Immigration and tax breaks for investment in residential property are being cited as the underlying causes of steep increases in the cost of housing over the past decade.
New Zealand now boasts one of the highest rates of home unaffordability in the world as a result of prices rising far faster than incomes, and the government’s Savings Working Group blames that squarely on the policies of successive governments.
Although “the favourable tax treatment of property investment” accounted for about 50% of house price increases between 2001 and 2007, the working group said, there was also strong evidence that rapid swings in immigration brought about price-rise “shocks”.
There was a sharp spike in immigration in 2001, 2002 and 2003 and, said working group committee member Dr Andrew Coleman, it appeared that property prices did not fall anywhere near as greatly when immigration fell again.
The report added that there was little evidence that immigration boosted local incomes. In fact, the need to build roads and schools meant that net migration contributed to the national deficit.
Government policies blamed for house prices

By Christmas i expect communism will own most of inner Auckland. The chinese banks a giving chinese cheap money to buy NZ properties and outbid my friends and family. What the hell sort of government do we have allowing NZers to get outbid like this?
Barfoot and Thompson CEO said 40% of auctions a going to asians. Last time i looked Auckland wasnt 40% asian

Just watching 60 Minutes re binge drinking in Australia. It was pointed out that we get policy due to the power of industry: alcohol, mining and in this case the Property Council (“$6B in assets, 20 corporate members” – some years back).

Yet another brain dead political party trying to constrain demand rather than address the supply side of Auckland’s house price inflation problem. Why is this such a difficult concept for politicians to grasp?

“People have to live somewhere, and so when we look at the last decade, the surge in
investment (for it is the investment share that rose markedly not the savings rate that
fell) is seen in residential investment (and public investment, much of it related to the
underlying public infrastructure a new population demands). At an OECD level, there
has been a strong long-term cross-country relationship between the residential
investment share of GDP and the rate of population growth – as one would expect.
There isn’t much sign of excess housing stock (Peter’s point) or excess public
infrastructure – the rapid population growth rates successive governments chose to
pursue, look to have crowded out real business investment.

You will notice that business investment as a share of GDP has pretty consistently
been around or below the OECD median since the late 1980s. But over that period
we have had among the fastest rates of population growth – so we needed more
investment as a % of GDP than the median OECD country just to maintain capital
stock per worker. Peter’s team sent me the national data underlying this chart: when I
plotted it there was basically no relationship between the business investment share of
GDP and the rate of population growth, suggesting that all else equal rapid population
growth crowds out capital deepening. At very least that seems to have been the case
here.
When a family falls on hard times, and has to devote lots of energy to stabilizing the
situation, and then decides to have another child (whatever the other merits of the
case) that will almost invariably worsen the family’s economic position. It is a folksy
comparison and breaks down at some points, but NZ is in some respects that family:
choosing to have lots more kids, as it were, just when were in a position to capitalize
on the good positioning reforms put in place by successive governments in the late
1980s and early 1990s. In that story, housing is more than a symptom but less than a
cause.http://www.treasury.govt.nz/downloads/pdfs/mi-jarrett-comm.pdf

In re-posting your selective quotation for the hundredth time you somehow forgot to mention these, hj.

You’re just a liar, aren’t you.

“In recent years there has been a lot of research on the economic impacts of immigration, both in New Zealand and abroad. In many areas a consensus has been reached on what the impacts are, although in some other areas there remains uncertainty. This report reviews 2005-2010 research on the economic impacts of immigration. The report concludes that immigration has made a positive contribution to economic outcomes in New Zealand and that fears for negative economic impacts such as net fiscal costs, house price inflation, lower wages, and increasing unemployment find very little support in the available empirical evidence. Moreover, the economic integration of immigrants is broadly successful. Migration increases trade and tourism, both inbound and outbound. The net fiscal impact of immigration is positive. The links between immigration and technological change are complex. Additional immigration raises gross domestic product (GDP) per capita, albeit only modestly. Without net immigration, GDP per capita would be less. Changes in immigration policy and in the New Zealand economy over the last quarter century now yield greater economic benefits from immigration than in the past.”http://www.dol.govt.nz/publication-view.asp?ID=362

“It was estimated that the immigrant population, of 927,000, had a positive net fiscal impact of $3,288 million in 2005/06. The New Zealand-born population of 3.1 million had a lower net fiscal impact of $2,838 million. In total, migrants contributed 40 percent more to government revenue than they received in government expenditure…We conclude that immigration has made a positive contribution to economic outcomes in New Zealand, and that fears for negative economic impacts such as net fiscal costs, house price inflation, and increasing unemployment are largely unfounded.”http://www.dol.govt.nz/publications/research/synthesis-research/synthesis-research_10.asp

Or, for the Australian government:

“While a larger population leads to a larger economy, the main issue is whether this expansion is accompanied by higher living standards. According to the PCPP, living standards, as measured by Gross National Product (GNP) per capita, are lower than would otherwise be the case for the first 12 years of the policy, but are then higher. After 20 years, the gain in GNP per capita reaches 0.6 per cent.”http://www.immi.gov.au/media/publications/pdf/Econtech_Comparison_Report.pdf

Geez Watt all those studies and the Savings Working Group (described as “a group of great thinkers” by Matt Nolan) ignored them:

Savings Working Group
January 2011
“The big adverse gap in productivity between New Zealand and other countries opened up from the 1970s to the early 1990s. The policy choice that increased immigration – given the number of employers increasingly unable to pay First-World wages to the existing population and all the capital requirements that increasing populations involve – looks likely to have worked almost directly against the adjustment New Zealand needed to make and it might have been better off with a lower rate of net immigration. This adjustment would have involved a lower real interest rate (and cost of capital) and a lower real exchange rate, meaning a more favourable environment for raising the low level of productive capital per worker and labour productivity. The low level of capital per worker is a striking symptom of New Zealand’s economic challenge.
”http://www.treasury.govt.nz/publications/reviews-consultation/savingsworkinggroup/pdfs/swg-report-jan11.pdf

Do you realize that your studies rely on computable general equilibrium (CGE) modeling where your outcome depends entirely on your assumptions?

and do they consider the effects of infrastructure requirements of immigration? Ans No it goes into the too hard basket.

Based solely on the fertility and migration choices of New Zealanders (each
presumably behaving fairly rationally), our population growth would have been
growing only quite slowly since the mid 1970s. As it is, our population growth since
1990 has been second or third fastest in the OECD. What changed? Migration
policy did in the early 1990s.
And 80% of our population growth in the last couple of decades has been the net
inflow of non NZ citizens - thus almost purely a matter of discretionary policy
choice. Government policy interventions can act to stymie successful adjustment –
and I believe this to have been the case in NZ over the last two decades. Our negative
NIIP position is larger, our real exchange rate is higher, our real interest rates are
higher, and our capital stock per worker (and associated perceived business
opportunities) are lower than they would have been if we had simply let the self-
stabilising behavior take its course. As John McDermott’s slides showed earlier, that
adjustment was working prior to the mid 1980s.
Among policy and analytical circles in New Zealand there is a pretty high degree of
enthusiasm for high levels of immigration. Some of that stems from the insights of
literature on increasing returns to scale. Whatever the general global story, the actual
productivity track record here in the wake of very strong inward migration is poor.In an Australian context, the Productivity Commission – hardly a hot-bed of
xenophobia or populism – concluded that any benefits from migration to Australia
were captured by migrants and there were few or no discernible economic benefits to
Australians. And that was in a country already rich and successful and with
materially higher national saving and domestic investment rates than those in NZ.
But very little of the global discussion of migration has factored in the sort of specific
circumstances New Zealand has found itself in. With relatively low national savings
rates, and with a relatively well-educated and skilled domestic workforce, it isn’t
obvious that applying a lot more labour to the situation was the route to success in
trying to reverse decades of relative economic decline (a very different situation say
from Singapore with lots of savings, bringing in people to utilize that domestic
resource)http://www.treasury.govt.nz/downloads/pdfs/mi-jarrett-comm.pdf

A potentially more important omitted category is the large-scale public
infrastructure investment that might be needed following the expansion of the
population. This kind of expenditure is conceptually difficult to allocate to
relatively small changes in the population resulting from immigration. There is
also the question to what extent existing infrastructure is sufficiently
underutilised to be able to cope with additional population without incurring
congestion effects. This may be particularly important in New Zealand, where
most new migrants settle in Auckland; a city in which, for example, investment
in transportation infrastructure has not kept pace with increasing demand.http://www.dol.govt.nz/publication-view.asp?ID=362

Yes I’m afraid this policy is finally going to make a difference in their polling because hj and martinh are quite correct in their observation of the phenomena and it’s what I’ve been saying since Akld overheating started hitting the news. Aucklanders don’t care if a study says different, they know what they see when they rock up to an auction.

Like I’ve said, this phenomena affects not just the buyers who get outbid but also their parents and grandparents and in that sense it has political leverage like Student Loans did and any party who says they will deal with it gets not just first-home buyers but many others as well. Simple as that. And if the Nats don’t do something similar they could easily lose in 2014. And like I’ve said, none of this needed to happen. They should have front-footed it because anyone could see it wouldn’t disappear and munting on about supply and never mentioning demand which has been their tactic to date, simply looks more and more to the voter like King Canute. Frankly I don’t understand why National has been so wilfully ignorant on this issue. All I can think of is they have an ideological hands-off position on it. And that’s mental, if your ideology is going to cost you the election and with a bit of lateral thinking you can keep your ideology intact AND deal with the issue at the same time. Because remember, we’re dealing with people who WANT to come here. They don’t come here to buy property, they come here for other reasons so you simply make sure your policy doesn’t affect those other reasons and that’s not rocket science.

A number of econometric models have indicated that immigration has favourable effects on
the New Zealand economy. The most influential was that done by Poot, Nana and Philpott
(1988) who found that immigration accelerates economic growth and reduces unemployment.
However, such models have been criticised as the results are strongly influenced by the
assumptions and parameter built in by the model makers (Chapple, Yeabsley, and Gorbey
1994). The limits of such models were illustrated by Peter (1993) who revealed that
assumptions regarding economies of scale, labour force participation, spending and
productivity of migrants are crucial to results. By changing his assumptions to equally
plausible alternatives, Peter found he could reverse the findings on the benefit of migrants on
the Australian economy.
Poot et al.’s (1988) model was based on the assumptions of economies of scale and
technological change allowing for 1.5% less inputs per unit of output. However, there is little
evidence that New Zealand’s industries benefit from economies of scale. New Zealand’s
biggest and most successful industries such as dairying, tourism, fisheries, do not rely on
domestic economies of scale. Nor did their model consider any diseconomies of scale such as
the infrastructural congestion caused by increased population density. This influential
research is now twenty years old and in that time, the industries most likely to benefit from
economies of scale ie: manufacturing have gone into decline as more production is located
off-shore. Globalisation would also imply focusing on off-shore markets is a more logical
approach of obtaining economies of scale given the size of the international market vis-à-vis
an expanded domestic market. In this way, globalisation has actually decreased the rationale
for the free flow of labour for countries like New Zealand.
DISCUSSION PAPER
NEW ZEALAND IMMIGRATION POLICY
Dr Greg Clydesdale (PhD)
Senior Lecturer
Department of Management and International Business
Massey University – Albany

This whole issue is getting overblown by silly little anecdotes from auction rooms. The majority of those Asians bidding will be NZ residents.

Asians are very selective on the property they buy, they buy big 5 bedroom new houses in nearly any area or anything in the Auckland Grammar zones. If they can get their children into AGS, EGGS etc they will live in a 2 bedroom unit if they have to. There has been huge gains in the 2 bedroom market in grammar zones. Check out this one and don’t be surprised if it sells in the 700-800 range http://www.trademe.co.nz/property/residential-property-for-sale/auction-618709274.htm

Now on to the Labour press release – talk about lies by omission! This is their statement today:
” An estimated 2,600 homes were bought last year by offshore property speculators that had no intention of living here. That’s a big chunk, given that just 4,700 new homes were built in Auckland last year”.

They omit the fact that around 70,000 homes were sold in NZ, so these offshore speculators make up about 3% of sales rather than the 55% they are trying to suggest.

martinh (225) Says:
July 28th, 2013 at 8:04 am
Mark
Do you not understand demand and supply is economics not just supply?
Are you happy that Nzers a pushed out to the fringes to new supply while communists buy the inner suburbs?

FFS Martin house price affordability is not primarily about asian investors, it is a side show to the real problem. Auckland is not building enough housing units to keep up with the population growth. Building enough housing is constrained primarily by two things, land supply and the RMA making even medium density development expensive and difficult to put in place. Labour is digging up an Australian policy which in itself will not address the house price problem in Auckland. The problem here crosses the political divide as both Labour and national governments continue to talk about but fail to address the cost of RMA compliance.

Further for your edification constraining demand by making the hurdle for first home buyers a higher one does not address the fact that the population growth still continues to outstrip the supply of new housing units so yes it is a supply side problem and will continue to be until there is a greater balance between population growth and the supply of housing units.

I am not a Labour supporter but I believe this to be a very good Policy by Labour. Can anyone tell me how our second hand residential property market is big enough to sustain purchases from non residents. When ,Singapore, Hong Kong, Australia, UK Canada don’t allow it. Why should they allow to come in here by the bus load then buy up our second hand housing market. Phark off back over seas rent it out ,and pay no bloody tax!!. If you are an overseas Investors when you are getting no return in your banks in Savings account the best target is housing in a low inflationary environment like NZ was 2 years ago ,and create an inflationary environment. Those over seas investors that bought two or three years ago have made a 20 to 30% return on their money pay no tax or no capital gains tax how does that help our small economy? Not to mention cutting a number of first home buyers out of the Market by forcing prices up. Many of you will be aware of all the black money in China which very wealthy people don’t want to put into their system the easiest way to wash it is to put into housing in NZ which gives a great return, and there is hundreds of Millions of that sort of money. Ask a Chinese real estate agent they will tell you. The only disappointing thin is that Key and National didn’t do anything about this sooner as it will be a vote winner!

I have the impression that, as soon as somebody flies in to New Zealand (with enough money) and their feet touch the ground, then they are virtually defined as kiwis from that point on. If not, they just wait until the residency comes through (thinking fat germans here obviously) and then they are definitely full-blooded kiwis, cant be spied on and, I assume, cant be referred to as “foreigners” (they are one of “us” ). And this is from the lefties.

So, can Shearer tell us again, who is this housing policy going to stop? All those “foreigners” at the house auctions, probably are already residents but look “foreign”.

What I found most interesting in the supposed policy (which seemed to merely be musings, but live broadcast musings), is that Australians will be exempt. So guess which group of “foreigners” were the ones who bought more houses than any other group? The Aussies! Next came the Brits, and in a distant third were Asians, primarily Chinese as I recall. And as someone else noted earlier, “foreigners” took up less than 10 % of all house purchases (not just new houses). The number I recall was something around 5 %. It will mean SFA to house prices, BUT sadly will have an impact far out of proportion to the results it will make, EXCEPT to discourage the arrival of the very immigrants who come here to invest and contribute to the growth of the NZ economy.

I think you are mistaken, This isnt yet another Green policy being adopted by Labour – it is a NZ First policy. Labour was alarmed by John Key’s comments last week indicating he would be open to forming a government with Winston’s support after the next general election. This policy is Labour’s response.

David in Chch, you didn’t listen very well. This is a small part of a broader policy, every little bit helps. How will it discourage the arrival of new immigrants? New immigrants would not be excluded from buying a house under this policy. Non residents could also still by property here, but only if they build a new house, which will increase supply..

How do logic and reason lose? Is it not reasonable that someone who doesn’t live in this country should not be able to buy an existing residential property in this country ahead of someone who does live here?

@ warren Murray – Winston said on a TV interview that NZ first would not go into a coalition government with National in any way at all unless their condition of buying back the power companies was met. Can you see Key doing that?